Medvedev says gas deal with Greek Cyprus no easy fix

Russian Prime Minister Dmitry Medvedev has cast doubt on media reports that Russia may offer a loan to crisis-hit Greek Cyprus in return for gas exploration rights, saying there are questions regarding commercial viability and Turkish objections to Greek Cypriot attempts to explore hydrocarbon reserves in the eastern Mediterranean.

Medvedev was speaking as Greek Cyprus Finance Minister Michael Sarris meets Russian officials in Moscow to discuss a deal on resolving the Greek Cypriot debt crisis. Sarris arrived in Moscow on Tuesday after the Greek Cypriot parliament threw out a proposal to tax bank deposits in return for a 10 billion euro bailout from the European Union.

Media reports have claimed that state gas giant Gazprom had offered a loan in return for natural gas exploration rights off the Greek Cypriot coast. Gazprom's spokesman, Sergei Kupriyanov, denied that the gas company had made such an offer, according to a New York Times report. However, the company's media office did not exclude the possibility that its banking subsidiary, Gazprombank, was in talks with the Cypriot government about extending aid, the report said.

Speaking to reporters in Moscow, Sarris confirmed that the issue of natural gas was on the table but did not elaborate on what the discussions were about. "There are a lot of teams now working on a number of issues. Banks and natural gas are the opportunities (on which) we can base some cooperation and some support from Russia," Sarris said.

Greek Cypriot plans to extract hydrocarbon reserves in the eastern Mediterranean have infuriated Turkey, which insists that Greek Cyprus does not have the right to conduct explorations before reaching a settlement in reunification talks with the Turkish Cypriots and that the mineral wealth belonged to both communities.

Greek Cyprus has recently discovered significant offshore gas deposits, and major international energy companies have shown an interest in tapping those resources.

Commenting on the issue, Medvedev indicated that such a deal would prove to be difficult, citing uncertainties on pricing and disputes with Turkey. “This is a difficult issue to negotiate,” he said.

Media reports also said that Russia has proposed loans to Greek Cyprus in return for a naval base, although Russian officials have refused to confirm such claims. Citing a report by Greek Cypriot state television, Turkish daily Hürriyet said the Russian side has requested the right to use Paphos Airport on the island's southeast and the Mari Naval Base on the southern coast.

The Greek Cypriot parliament on Tuesday overwhelmingly rejected a proposed levy on bank deposits as a condition for a European bailout. Russian depositors hold about 30 percent of the 68 billion euros ($88 billion) in deposits in Greek Cypriot banks.

The European proposal has angered Russia, which sees it as aimed at extracting money needed to rescue Greek Cyprus from Russian depositors. Medvedev had earlier said the European Union had behaved "like a bull in a china shop,” likening the proposal to Soviet-era expropriations.